TURKEY: JPMorgan Maintains Year-End Policy Rate Forecast At 30%

Gilts led a global core FI rout Tuesday, with UK yields rising 8-9bp across the curve.

• The Gilt sell-off was not due to a single factor: partly in anticipation of Wednesday's CPI release, and partly on prelim May services PMI which slipped to a 2-month low but held hawkish details.
• Terminal BoE pricing rose as much as 13bp to 5.13%, before fading.
• Weakness in the German curve was relatively tame, with yields up 0-1bp. Like the UK's PMI report, Eurozone manufacturing came in weak, but services were probably too strong for the ECB's comfort.
• Eurozone central bank speakers had little impact: BoE's Bailey had little new to say, while the largest mover was Monday's hawkish-leaning after hours comments by ECB's de Cos who said there was still a way to go on rate hikes.
• Following Monday's strong rally led by Greece, periphery spreads were mixed/unchanged.
• UK inflation leads Wednesday's docket, but we also get German IFO, Bund and Gilt supply, and appearances by Bailey and ECB's Lagarde.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 1.3bps at 2.822%, 5-Yr is up 0.3bps at 2.451%, 10-Yr is up 1bps at 2.469%, and 30-Yr is up 0.8bps at 2.642%.
• UK: The 2-Yr yield is up 8.2bps at 4.135%, 5-Yr is up 8.8bps at 3.991%, 10-Yr is up 9.4bps at 4.158%, and 30-Yr is up 8.1bps at 4.533%.
• Italian BTP spread down 0.3bps at 185.2bps / Greek down 0.4bps at 141.4bps

Tsy futures remain weaker but off midmorning lows ahead the $42B 2Y note auction (91282CHD6) at the top of the hour. WI is currently running around 4.335%, 36.6bp cheap vs. last month's tail:

• April auction recap: Tsy futures inched back near highs after the $42B 2Y note auction (91282CGX3) tailed slightly: 3.969% high yield vs. 3.965% WI; 2.68x bid-to-cover vs. 2.44x prior.
• Indirect take-up to 61.20% vs. 52.80% prior month, direct take-up 19.87% vs. 24.17% prior, primary dealer take-up 18.93% vs. 23.03%,
• Timing: Results for the latest 2Y note sale will available shortly after the competitive auctions closes at 1300ET.

• USDCAD tests yesterday’s and overnight joint lows of 1.3486, coming as GoCs extend earlier underperformance to Tsys and WTI climbs, rather than a more meaningful recovery in the S&P E-mini.
• CAD outperforms all other majors post holiday thinned trade.
• 2Y GoC yields now +12.4bps (Tsys +6.7bps) and notably 10YY +11.8bps (Tsys +2.3bps), with no obvious headlines for the latest move.
• The pair has already fallen ~60 pips off earlier highs but there is still some leeway for more notable support at the 1.3404 low post-CPI on May 16.

USDCADSource: Bloomberg